4th Quarter 2017

Greg Dunn is portfolio manager for Thornburg Investment Management. Greg joined ­Thornburg in 2002 as research communications director for the marketing department and was promoted to equity ­research associate in 2005, associate portfolio manager in 2008, and portfolio manager in 2012.

Prior to joining Thornburg, Greg was an investment management analyst for Smith Barney. Greg holds a BS in business with a concentration in finance from Colorado State University and an MBA from Duke University's Fuqua School of Business.

U.S. stocks ended 2017 much like they
began it: on a nearly uninterrupted
upward trajectory that saw few pullbacks
of any meaningful magnitude or duration.
For the entirety of 2017, the S&P
500 Index did not post a single negative
monthly return, the only time in its
94-year history. This is remarkable in and
of itself, and, coupled with the lowest volatility
in 10 years, created a unique market
environment with few dislocations.
As long-time investors may recall, we find
market corrections to be an ideal time to
deploy capital in high-quality growth
businesses as their valuation multiples
often compress to a greater degree than
the broader market on pullbacks. While
we are not in the business of predicting
market corrections, it seems unlikely
that the market will have another year
without a monthly loss. If that arises, we
will be aggressive in deploying capital to
high-quality growth businesses trading at
attractive valuations.

For the fourth quarter of 2017, Thornburg
All Cap Growth Strategy returned 4.87%
(net of fees), versus the Russell 3000
Growth Index return of 7.61%.

While the strategy generated a positive
absolute return for the quarter, there were
several challenges. In addition to a market
that was providing few opportunities
to buy high-quality growth companies at
a discount to intrinsic value, we had several
names that were heavily punished for
third-quarter earnings misses. Much like
with market corrections, we find opportunities
to invest during these large price
corrections of individual holdings, as
they tend to be oversold in the near term,
while the long-term growth prospects
remain compelling. This is precisely what
we did in the quarter for the holdings in
which long-term earnings growth prospects
were not impaired.

At the sector level, the strategy’s best-performing
areas were materials, financials,
energy, and consumer staples. Our average
allocation to these sectors for the
period was just 18% of the portfolio in
aggregate, and thus their outsized returns
were less impactful to the portfolio overall.
Information technology is our largest
sector exposure, and we modestly lagged
the market primarily due to weakness
in two stocks. The biggest drag on performance
for the quarter again came in
industrials, where we were underweight
and had poor performance driven by
weakness in two individual holdings.

Top Contributors

FleetCor Technologies, Inc.
FleetCor is the world’s largest provider
of fleet payment cards. The company’s
shares rallied after it reported a beat
on third-quarter earnings and raised
guidance, while buying back more
shares than expected. We believe the
investment continues to be compelling,
as the initial outlook for 2018 appears
favorable and its valuation is still below
recent highs.

Walmart Inc.
Walmart has continued to make progress
on two fronts: its U.S. stores and
online business. The investment in
refurbishment and in higher pay for
associates (i.e., improving the in-store
experience) seems to be paying off, as
Walmart’s U.S. stores continue to show
positive traffic trends. Further, following
the acquisition of Jet.com and
an expansion of the products available
at Walmart.com, Walmart has posted
strong organic growth recently in its
online business.

Cavium, Inc.
Cavium is a provider of semiconductor
processors that enable intelligent functionality
for applications in networking,
communications, storage, and security.
During the quarter, Cavium agreed to
be acquired by another semiconductor
company, Marvell Technology Group,
for a substantial premium to its current
valuation.

SVB Financial Group
SVB (formerly Silicon Valley Bank)
specializes in providing banking services
to startup, technology, and life
science companies. Shares rallied after
SVB reported a very good third quarter
that demonstrated high growth and
excellent credit-quality metrics.

Amazon.com, Inc.
Amazon continued to show strong
momentum in both its e-commerce and
web services business. Quarterly results
exceeded expectations as growth accelerated.
Amazon continues to lead the
retail shift to e-commerce, which is
still in its early days at 10% market
penetration. Amazon is a share gainer
in e-commerce as it continues to press
scale-driven advantages of selection,
availability, and superior service levels.

Top Detractors

Wix.com Ltd.
Wix is a global cloud-based platform
that enables businesses and individuals
to create and manage professionalquality
websites. Shares were pressured
in the fourth quarter following
third-quarter earnings, as management
guided for more research and development
and marketing costs in 2018
as it takes advantage of new growth
opportunities in the professional website-
developer market. While these
investments depress earnings in the
near term, we believe they position the
company to capture more market share
over the long term.

General Electric Co.
During the quarter, GE cut its dividend
and future earnings expectations.
Its Power business has been the largest
source of disappointment, with heightened
competition and softening end
demand.

Criteo SA
Criteo is a retargeting company that
works with internet retailers to serve
personalized online advertisements to
consumers who have previously visited
the company’s website. During
the year, Apple announced that its new
operating system would automatically
purge third-party internet cookies
that Criteo uses to track Safari internet
browser users. During the fourth
quarter, Criteo announced that its initial
solution to address the Apple issue
would be less effective than initially
thought, pressuring shares.

Newell Brands, Inc.
Newell Brands is a global marketer of
consumer and commercial products
with a portfolio of over 200 leading
brands, including Sharpie, Rubbermaid,
Graco, Coleman, Yankee Candle,
and many others. The company
reported a weak set of third-quarter
results, and core sales growth fell short
of expectations due to retailer destocking
and inventory adjustments at some
key accounts.

Nevro Corp.
Nevro is a medical device company that
provides products to treat chronic pain,
specifically a spinal cord stimulation
system for the treatment of back pain.
Its product is an alternative to treating
back pain with opioid drugs. The stock
was weak during the quarter primarily
as a result of weaker-than-expected
guidance for the fourth quarter of 2017.
We believe the long-term prospects of
the business are still exciting.

We continue to consistently adhere to our
process and philosophy that employs rigorous,
bottom-up fundamental analysis as
we strive to build a portfolio of great businesses
with attractive growth prospects.

Thank you for investing in Thornburg All
Cap Growth Strategy.

Contributors to Performance1(Representative Account)

Name

Contrib %

Avg Wgt %

FleetCor Technologies, Inc.

0.79

3.55

Walmart Inc.

0.65

2.64

Cavium, Inc.

0.63

2.46

SVB Financial Group

0.55

2.42

Amazon.com, Inc.

0.51

2.58

Detractors from Performance1(Representative Account)

Name

Contrib %

Avg Wgt %

Criteo SA

-0.65

1.38

General Electric Co.

-0.58

1.67

Nevro Corp.

-0.58

2.25

Newell Brands, Inc.

-0.57

0.96

Wix.com Ltd.

-0.36

1.60

1. Past performance does not guarantee future results. To obtain the calculation methodology and a list showing the contribution of each holding in the representative account to the overall account's performance during
the reporting period, please email a request to bdg@thornburg.com. The holdings identified do not represent all
of the securities purchased, sold or recommended for advisory clients.

U.S. Stocks Fall into Correction Territory, But Investors Should Keep Their Chins Up

Investors worried about wage and inflation data should appreciate the underlying strength of the economy, not to mention strong corporate earnings. Market volatility is creating better entry points for longer-term investors.

Related Video

September 2017

Collaborative Process Key for Thornburg

June 2016

Actively Managed. Structured for Excellence

Important Information

Show More

Performance data for the All Cap Growth Strategy is from the All Cap Growth Composite, inception date of January 1, 2001. The composite includes non-wrap discretionary accounts invested in the All Cap Growth Strategy. Returns are calculated using a time-weighted and asset-weighted calculation including reinvestment of dividends and income. Returns are annualized for periods greater than one year. Individual account performance will vary. The performance data quoted represents past performance; it does not guarantee future results. Gross of fee returns are net of transaction costs. Net of fee returns are net of transaction costs and investment advisory fees. For periods prior to 2011, net returns for some accounts in the composite also reflect the deduction of administrative expenses. Thornburg Investment Management Inc.’s fee schedule is detailed in Part 2A of its ADV brochure. Performance results of the firm's clients will be reduced by the firm's management fees. For example, an account with a compounded annual total return of 10% would have increased by 159% over ten years. Assuming an annual management fee of .75%, this increase would be 142%.

As of 12/31/17

1 Yr

3 Yr

5 Yr

10 Yr

Inception 1/1/2001

All-Cap Growth Composite (Net)

24.54%

8.11%

12.77%

5.96%

6.84%

All-Cap Growth Composite (Gross)

25.60%

9.03%

13.72%

7.04%

8.17%

Russell 3000 Growth Index

29.59%

13.51%

17.16%

9.93%

5.97%

Unless otherwise noted, the source of all data is Thornburg Investment Management, Inc., as of 12/31/17.

The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.

Holdings may change daily and may vary among accounts.

The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account's portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account's entire portfolio and in the aggregate may represent only a small percentage of an account's portfolio holdings. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

Portfolio holdings and characteristics shown herein are from a representative account managed within the investment composite. The representative account is selected based on account characteristics that Thornburg believes accurately represent the investment strategy as a whole. Should these characteristics change materially, Thornburg may select a different representative account. Holdings may change daily and may vary among accounts, which may contribute to different investment results. The representative account information is supplemental to the strategy’s composite and GIPS compliant presentation.

Portfolio construction will have significant differences from that of a benchmark index in terms of security holdings, industry weightings, asset allocations and number of positions held, all of which may contribute to performance, characteristics and volatility differences. Investors may not make direct investments into any index.

financial advisor access

Sign in to access resources and materials for financial professionals.

Important Disclosure: For Professional Investors Only

This area of our web site is only directed at non-U.S., institutional and professional investors and is not suitable for individual investors.

The information regarding funds for non-U.S. investors is for informational purposes only, does not constitute an offer for shares, products or services and should not be construed as an offer to sell or a solicitation of an offer to buy to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence.

This site is operated by Thornburg Investment Management, Inc. on behalf of Thornburg Investment Management Ltd. and Thornburg Global Investment plc. Before continuing, please read the following important information and if you continue on, you confirm that you have read and agree to these provisions. Thornburg Global Investment plc is authorised under the UCITS Regulations and provides shares in UCITS registered Funds for non-U.S. investors. The Funds of the Company are registered in Ireland and are available only to residents of those jurisdictions where allowed by applicable law. Purchase orders from U.S. persons or other ineligible investors will not be accepted by the Fund’s Administrator.

Thornburg Investment Management Ltd. is an Appointed Representative of Robert Quinn Advisory LLP, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom (no. 548030). Thornburg Investment Management Ltd. manages Thornburg's international business development and relationship management activities. Registered in England and Wales no. OC385286.

This content is not intended for U.S. persons. If you are trying to find information about Thornburg Investment Management or the Thornburg Funds registered for sale in the United States, please close this dialog and look for Mutual Funds titles in the main menu. Further information on what constitutes a U.S. person is available here and in the event that you wish to use this website it is your responsibility to ensure that you understand the terms of this definition and comply with it.

By continuing you confirm that you have read and agree to the provisions above.